IFA 3 and 2 Mark Questions QB Only

DIPLOMA IN IFRS QUESTION BANK
2 and 3 mark questions and answers
These questions can be used for teaching and assessment during the course
IFRS Short Questions – 3 marks
IFRS 2 Share-based Payments - 1 Short Question – 3 marks
1. IFRS 2 – 3 marks
On 1 January 20X1 the management board of a company announced a share award plan to its
employees, specifying all terms and conditions. This plan will be for a 2, year period. The
announcement also, made clear that the plan needed to be approved by the board of directors. The
plan was approved on the 1 March 20X1.
State the grant date.
State the date the expense was recognised.
State the vesting period.
3. Answer IFRS 2 – 3 marks

The grant date is 1 March 20X1
The expense is recognised starting from 1 January 20X1.
The vesting period is 2 years.
IFRS 3 Business Combinations - 1 Short Question – 3 marks
On 1 April 20X0, ST acquired the following non-current investment -
Six million equity shares in ZN by an exchange of one share in ST for every two shares in ZN, plus
$1.15 per acquired ZN share in cash. The market price of each ST share at the date of acquisition
was $5 and the market price of each ZN share at the date of acquisition was $4.25.
Calculate the consideration for a controlling interest in ZN.
State the share price that should be used to calculate the fair value of the non-controlling interest in
ZN.

Shares issued by ST – 3m
Value – 3m x $5 = $15m
Cash 6m x $1.15 =$ 6.9m
Total consideration = $21.9m
NCI share price - $4.25
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©IFA Diploma in IFRS
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations - 2 Short Questions – 3
marks
1. Short question IFRS 5 – 3 marks

In April 20X0, a company decided that a segment of the business was not performing adequately and
should be discontinued. This segment represents a separate major line of business.
Explain the main requirements of IFRS 5.

The company is disposing of a segment of business in a geographic area of operations.
The total of the post-tax profit or loss of the discontinued operation, and the post-tax gain or
loss recognized on the measurement to fair value less cost to sell, should be presented as a
single figure on the face of the income statement.
IFRS 5 requires detailed disclosure of revenue, expenses, pre-tax profit or loss, and the related
income tax expense either in the notes or on the face of the income statement. If it is on the
face of the income statement, then the information should be separately disclosed from that of
continuing operations.
The net cash flows attributable to the operating, investing and financing activities of the
discontinued operation should be separately shown on the face of the cash flow statement or
disclosed in the notes.
Retrospective classification as a discontinued operation where the criteria are met after the
balance sheet date is prohibited by IFRS 5.
State the purpose of IFRS 5.

IFRS 5 deals with the accounting for non-current assets held-for-sale, and the presentation
and disclosure of discontinued operations. It introduces a classification for non-current assets
which is called - held-for-sale.
IFRS 9 Financial Instruments – 2 Short questions – 3 marks
A company has a financial asset, designated to be measured at amortised cost, and its, carrying
amount at 31 May 20X0 was $5m. It was realised early in 20X1 that there was doubt about fully
recovering of the amounts due to the company and that an impairment review would have to be
undertaken. The expected future cash flows now expected by the company from the bond issuer are
as follows:
Year end Expected cash flows Discounted at 5% DCF
31 May 20X1 $0.10m .9524
31 May 20X2 $0.10m .9070
31 May 20X3 $0.10m + $4.8m .8638
Calculate the extent of impairment of the financial asset for the year ending 31 May 20X1.
Year end Expected cash flows Discounted at 5% DCF
31 May 20X1 $0.10m .9524 $.0952
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31 May 20X2 $0.10m .9070 $.0907
31 May 20X3 $0.10m + $4.8m .8638 $4.233
$4.419
Impairment amounting to the change in carrying value of ($5.0m – $4.419m) $0.581m will be
recognised as an impairment charge in the year to 31 May 20X1.
IFRS 10 Consolidated Financial Statements and IFRS 13 Fair Value Measurement – 4 Short
questions – 3 marks
1. IFRS 10 and 13 – 3 marks

AB Group acquired 100% of the ordinary shares in AC on 1 January 20X0 for $10,750,000. The
goodwill of AC Company has been calculated as $2,750,000 and it is to be amortised over 5 years.
Since calculating goodwill, it has been found that at the date of acquisition AC’s property’s carrying
cost of $8m is greater than its fair value by $500,000. AC has not adjusted the carrying amount of the
property. The depreciation has been overstated by $150,000.
Also, the fair value exercise has revealed that 10% of existing debtors are unlikely to pay. Debtors’
carrying value was $225,000.
State the fair value of property and debtors.
State the value of goodwill for 31 December 20X1 after making all necessary adjustments.
1. Answer IFRS 10 and 13 – 3 marks

Debtors - $202,500 Property $7.65m
Goodwill is at the 1st of January 20X1 $2,750,000 + $500,000 - $150,000 + $22,500 = $3,122,500

CPO Group acquired 100% of WSA on 1 April 20X1. CPO has also agreed to pay the previous
owners of WSA $5m on 1 June 20X1. A draft statement had stated that goodwill was $15m before this
agreement came to light.
State the final goodwill amount and the liability that must be recorded.
Record the journal entries for the 1 June 20X1 when the payment must be made.

Goodwill – $15m + $5m = $20m as that is what should have been calculated on the date when
CPO gained control of WSA.
Liability – $5m
Dr goodwill – $5m and Cr - $5m current liabilities
Dr current liabilities – $5m and Cr bank – $5m

XXS Group acquired 100% of XYS on 1 February 20X1. XXS has agreed to pay the previous owners
of XYS $2m in 18 months if growth in the company increases by 3%. The valuer set a fair value of
$1m as at 1 February 20X1, as she thinks that this increase in growth is unlikely. At 31 January 20X2,
the fair value is increased by $500,00 as growth conditions are more favourable.
State the appropriate journal entries on the 1 February 20X1.
State the appropriate journal entries on the 31 January 20X2.
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On 1 February 20X1 the fair value of $1m is added to the consideration in the goodwill
calculation (Dr) and to provisions as a non-current liability (Cr).
At 31 January 20X2, fair value has increased from $1m to $1.5m. This increase of $500,000 is
not added to goodwill it is instead, expensed to the statement of profit or loss to reflect the
increase in the provision with the double entry Dr P/L, Cr provision. As the amount is now
potentially payable in one year, it will be moved from non-current liabilities to current
liabilities.

XXS Group acquired 100% of XYS on 1 February 20X1. XXS has agreed to pay the previous owners
of XYS $3m in 18 months if growth in the company increases by 4%. The valuer sets the fair value at
$3m as at 1 February 20X1, as she thinks that this increase in growth is very likely. At 31 January
20X2, the fair value is decreased by $1m as growth conditions have become unfavourable.
State the appropriate journal entries on the 1 February 20X1.
State the appropriate journal entries on the 31 January 20X2.

On 1 February 20X1 the fair value of $3m is added to the consideration in the goodwill
calculation (Dr) and to provisions as a non-current liability (Cr).
At 31 January 20X2, it has decreased from $3m to $2m. This decrease of $1m is not an
adjustment to goodwill it is instead, credited to the statement of profit or loss to reflect the
decrease in the provision with the double entry Cr P&L, Dr provision. As the amount is now
potentially payable in one year, this will be moved from non-current liabilities to current
liabilities.
IFRS 12 Disclosure of Interests in Other Entities - 3 Short Questions – 3 marks
An entity must disclose information about….. and provide two examples related to the control or
influence over another entity.

Significant judgements and assumptions it has made, and changes in those judgements and
assumptions, in determining -
That it controls another entity.
That it has joint control of an arrangement or significant influence over another entity.
The type of joint arrangement (i.e. joint operation or joint venture) when the arrangement has
been structured through a separate vehicle.
An entity shall disclose information that enables users of its consolidated financial statements to
understand or evaluate …. - give at least three examples….

Understand the composition of the group.
Understand the interest that non-controlling interests have in the group's activities and cash
flows.
Evaluate the nature and extent of significant restrictions on its ability to access or use assets,
and settle liabilities, of the group.
Evaluate the nature of, and changes in, the risks associated with its interests in consolidated
structured entities.
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Evaluate the consequences of changes in its ownership interest in a subsidiary that do not
result in a loss of control.
Evaluate the consequences of losing control of a subsidiary during the reporting period.
IFRS 15 Revenue from Contracts with Customers - 1 Short Question - 3 marks
State the three necessary attributes for a contract to exist between two or more parties.

Step one in the five-step model requires the identification of the contract with the customer.
Contracts may be in different forms (written, verbal or implied), but must be enforceable, have
commercial substance and be approved by the parties to the contract.
IAS Short Questions – 3 marks
IAS 8 Accounting Policies, Changes in Accounting Estimations and Errors – 1 Short Question
– 3 marks
1. IAS 8 – 3 mark
Materiality – State the definition of materiality and give 2 examples.
1. Answer IAS 8 – 3 marks

Information is material if omitting, misstating or obscuring it could reasonably be expected to
influence decisions that the primary users of general purpose financial statements make on
the basis of those financial statements, which provide financial information about a specific
reporting entity. Examples.
IAS 10 Events After the Reporting Period - 1 Short Questions – 3 marks
1. IAS 10 – 3 marks
Define an event after the reporting period….
Define a non-adjusting event….

An event, which could be favourable or unfavourable, that occurs between the end of the
reporting period and the date that the financial statements are authorised for issue.
An event after the reporting period that is indicative of a condition that arose after the end of
the reporting period.
IAS 12 Income Taxes - 2 Short Questions – 3 marks
Temporary differences between the tax base of an asset or liability and the carrying amount in the
financial statements can occur, because….
The technique of …………….is designed to deal with this difference.

Differences can occur because IFRS recognition criteria for items of income and expense are
different from their treatment under tax law. The IAS 12 standard is based on the temporary
differences between the tax base of an asset or liability and the carrying amount in the
financial statements.
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Deferred taxation accounting deals with this difference.
ZB has a debit balance of $2,450 on its current tax account and a credit balance on its deferred tax
account of $3,210. The tax liability for the current year is $9,500. Net assets have a carrying value of
$5,000 greater than their tax base. The standard rate of corporation income tax is 18%.
The tax charge is….

DT credit: $3,210 less $900 ($5,000X18%=$900) - $2,310
CT debit = $2,450 + $9,500 = $11,950
Tax charge: $11,950 - $2,310 = $9,640
IAS 19 Employee Benefits – 1 Short Questions – 3 marks
IAS 19 applies to several kinds of employee benefits – give three examples.

Compensated absences (paid vacation and sick leave).
Profit sharing and bonuses.
Medical and life insurance benefits during employment.
Non-monetary benefits such as houses, cars, and free or subsidised goods or services.
Retirement benefits, including pensions and lump sum payments.
Post-employment medical and life insurance benefits.
Long service, or sabbatical leave.
‘Jubilee' benefits.
Deferred compensation programmes.
Termination benefits.
IAS 36 Impairment of Assets - 2 Short Questions – 3 marks
A company purchased a machine on 1 June 20X3 for $80,000 which had a useful life of ten years and
is depreciated on the straight-line basis, time apportioned in the years of acquisition and disposal.
The machine was revalued to $81,000 on 1 June 20X4. There was no change to its useful life at that
date.
A fire at the factory on 1 November 20X6, badly damaged the machine.
The following information at 1 November 20X6 is relevant:

The carrying amount of the machine is $60,000.
An equivalent new machine would cost $85,000.
The machine could be sold in its current condition for $42,000.
In its current condition, the machine could operate for three more years which gives it a value in use
figure of $38,000.
Calculate the impairment loss.

$60,000 - $42,000 = $18,000
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A company purchased a machine on 1 June 20X0 for $80,000 which had a useful life of ten years and
is depreciated on the straight-line basis, apportioned in the years of acquisition and disposal. The
machine was revalued to $85,000 on 1 June 20X1. There was no change to its useful life at that date.
An accident at the factory on 1 October 20X3 badly damaged the machine.
The following information at 1 October 20X3 is relevant:

The carrying amount of the machine is $65,000.
An equivalent new machine would cost $95,000.
The machine could be sold in its current condition for $45,000. Costs of disposal are $3,000
In its current condition, the machine could operate for two more years which gives it a value in use
figure of $36,000.
Calculate the impairment loss.

$65,000 – ($45,000 - $3,000) = $23,000
IAS 38 Intangible Assets - 2 Short Questions – 3 marks
A company employs a team of programmers, outsourced by a consulting company, to develop
software for the automation of its management accounting and to provide support for the current
accounting software.
It might be possible to capitalize the cost of programme team alongside the software as part of the
value of the intangible asset:
Choose one from A, B, C, or D
A. Yes, it is, as a part of the development of the software

B. Yes, it is, as a part of supporting the active accounting software
C. No, it is not possible to capitalise this cost
D. Yes, as a part of the development of new software and support for existing software.

A
2. IFRS disclosure re IAS 38 – 3 marks

In financial reports prepared under International Standards a brand name (an intangible assets)
should be disclosed as follows….
2. Answer IFRS disclosure re IAS 38 – 3 marks

Total increase (decrease) through transfers and other changes, intangible assets other than
goodwill.
Disposals and retirements, intangible assets other than goodwill.
Total increase (decrease) in intangible assets other than goodwill.
IAS 40 Investment Property- 1 Short Question – 3 marks
Investment property is ….
Give 2 examples.

Property (land or a building or part of a building or both) held (by the owner or by the lessee
under a finance lease) to earn rentals or for capital appreciation or both.
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Examples of investment property -
Land held for long-term capital appreciation.
Land held for a currently undetermined future use.
Building leased out under an operating lease.
Vacant building held to be leased out under an operating lease.
Property that is being constructed or developed for future use as investment property.
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QUESTION BANK
IFRS Short Questions – 2 marks
IFRS 2 Share-based Payments - 2 Short Questions – 2 marks
The objective of IFRS 2 is….

The objective of IFRS 2 is to determine and recognise the compensation costs over the period
in which the services are rendered. For example, if a company grants share options to
employees that vest in the future only if they are still employed.
According to IFRS 2 intrinsic value should be used where……

Intrinsic value should only be used where a fair value cannot be reliably estimated. Intrinsic
value is the difference between the fair value of the shares and the price that is to be paid for
the shares by the counterparty.
IFRS 3 Business Combinations - 1 Short Questions – 2 marks
Explain the treatment of acquisition costs under IFRS 3.

All acquisition costs, even those directly related to the acquisition such as professional fees
(legal, accounting, valuation, etc), must be expensed.
IFRS 5 Discontinued Operations - 3 Short Questions – 2 marks
IFRS 5 state its new classification for non-current assets is called….

It introduces a classification for non-current assets which is called ‘held-for-sale’.
State two conditions under IFRS 5, for non-current assets to be classified as held-for-sale.

The conditions for a non-current asset or disposal group to be classified as held-for-sale are -
The assets must be available for immediate sale in their present condition and its sale must be
highly probable.
The asset must be currently marketed actively at a price that is reasonable in relation to its
current fair value.
The sale should be completed, or expected to be so, within a year from the date of the
classification.
The actions required to complete the planned sale will have been made, and it is unlikely that
the plan will be significantly changed or withdrawn.
IFRS 8 Operating Segments - 3 Short Questions – 2 marks
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IFRS 8 applies to the financial statements of….

IFRS 8 applies to the financial statements of any company whose debt or equity instruments
are traded in a public market or who is seeking to issue any class of instruments in a public
market.
If revenues from a single external customer amount to 10% or more of the total revenue of a company
then it needs to disclose.…

That fact
The total revenue from each customer (although the name is not needed).
The segment or segments reporting the revenues.
Entity-wide disclosures are needed even where the entity has only a single operating segment.
True or False……

True
IFRS 9 Financial Instruments – 1 Short Questions – 2 marks
Measuring financial assets at fair value through profit or loss means that initial recognition at fair value
is normally cost incurred and this will exclude….
1. Answers IFRS 9 – 2 marks

Transactions costs, which are charged to profit or loss as incurred.
IFRS 10 Consolidated Financial Statements, 13 Fair Value Measurement and IAS 37 Provisions,
Contingent Liabilities and Contingent Assets - 2 Short Questions – 2 marks
1. IFRS 10, 13 and IAS 37 – 2 marks

On consolidation contingent liabilities should be:
A. Disclosed only in the notes to the consolidated financial statements.

B. Ignored as they are unlikely to happen.
C. Consolidated at fair value as a liability at the date of acquisition.
D. Only consolidated if there is a change in the value of the liability.
Answer IFRS 10, 13 and IAS 37 – 2 marks

C
2. IFRS 10, 13 and IAS 37 – 2 marks

Consolidating contingent liabilities at fair value as a liability at the date of acquisition will:
A. Reduce the net assets at acquisition.
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B. Reduce the net assets at acquisition and increase the goodwill.
C. Increase the goodwill.
D. Reduce the amount of profit for the company.
2. Answer IFRS 10, 13 and IAS 37– 2 marks

B
IFRS 11 Joint Arrangements/IAS 24 Related Party Disclosures - 2 Short Questions – 2 marks
1. IFRS 11/IAS 24 – 2 marks

IFRS 11 states that there are now only two types of joint arrangements ….
1. Answer IFRS 11/IAS 24 – 2 marks

They are joint ventures and joint operations.
2. IFRS 11/IAS 24 – 2 marks

In determining whether a related party transaction exists consideration must be given to the….
2. Answer IFRS 11/IAS 24 – 2 marks

The substance of the relationship and not merely the legal form must be considered
IFRS 12 Disclosure of Interests in Other Entities - 2 Short Questions – 2 marks
The objective of IFRS 12 is to require the disclosure of information that enables users of financial
statements to evaluate….

The nature of, and risks associated with, its interests in other entities
The effects of those interests on its financial position, financial performance and cash flows.
IFRS 12 is required to be applied by an entity that has an interest in any of the following – name at
least two ….

Subsidiaries
Joint arrangements (joint operations or joint ventures)
Associates
Unconsolidated structured entities
IFRS 15 Revenue from Contracts with Customers - 2 Short Questions – 2 marks
State when an organization must recognise revenue from contracts with customers.

An organisation must recognise revenue when it fulfills its obligation to transfer the promised
product or service to the buyer. An asset is transferred when the buyer gains control of such
an asset.
IFRS standard 15 will apply to a contract when:
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A. Each party has signed the contract and agreed the rights of each party.
B. The payment terms are identified, and the entity is guaranteed payment.
C. The payment terms are identified, and the entity will probably collect the consideration.
D. All, of the above, but only if the contract is in a written form.

C
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IAS Short Questions – 2 marks
IAS 7 Statement of Cash Flows - 1 Short Question – 2 marks
The following information has been used to calculate the depreciation charge for the period using the
indirect method.
Depreciation b/f - $197,000

Depreciation c/f - $302,000
Unadjusted disposals - $87,000
Sale of a non-current asset – carrying amount - $56,000, sold for $51,000
The charge for the period is:

A. $105,000
B. $18,000
C. $136,000
D. $141,000

C
W1
Depreciation
Balance b/f 197
Charge for the year (bal) 136
Eliminated on disposals (31)
$87– $51- $5
Balance c/f 302
IAS 8 Accounting Policies, Changes in Accounting Estimations and Errors - 2 Short Questions
– 2 marks
1. IAS 8 – 2 mark
Accounting policies are the….

Specific principles, bases, conventions, rules, and practices applied by an entity in preparing
and presenting financial statements.
Proposed change - Accounting policies are the specific principles, measurement bases and
practices applied by an entity.
2. IAS 8 – 2 mark
The definition of a change in accounting estimate is....

An adjustment of the carrying amount of an asset or liability, or related expense, resulting
from reassessing the expected future benefits and obligations associated with that asset or
liability.
Proposed change - accounting estimates are - judgments or assumptions used in applying an
accounting policy when, because of measurement uncertainty, an item in financial statements
cannot be measured with precision.
IAS 10 Events After the Reporting Period - 2 Short Questions – 2 marks
State when non-adjusting events should be disclosed….
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If they are of such importance that non-disclosure would affect the ability of users to make
proper evaluations and decisions.
If a non-adjusting event must be disclosed, state the 2 requirements….

The nature of the event must be disclosed and an estimate of its financial effect or a statement
that it is not possible to make a reasonable estimate.
IAS 12 Income Taxes - 2 Short Questions – 2 marks
IAS 12 prescribes the accounting treatment for income taxes. Income taxes include….

Income taxes include all domestic and foreign taxes that are based on taxable profits.
The tax base of an asset or liability is….

The tax base of an asset or liability is the amount attributed to that asset or liability for tax
purposes.
IAS 19 Employee Benefits – 1 Short Questions – 2 marks
The objective of IAS 19 is to prescribe the accounting and disclosure for employee benefits, requiring
an entity to….

Recognise a liability where an employee has provided service and an expense when the entity
consumes the economic benefits of employee service.
IAS 21 The Effect of Changes in Foreign Exchange Rates - 4 Short Questions – 2 marks
Explain the difference between presentation currency and functional currency ….

Presentation currency is the currency in which the financial statements are presented.
Functional currency is the currency of the primary economic environment in which a company
operates.
State 2 factors that will determine a company’s functional currency.

The functional currency should be determined by looking at –
The functional currency should be the one in which the company normally generates and
spends cash.
Explain how a company can change its functional currency.
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The entity’s functional currency reflects the transactions, events and conditions under which
the entity conducts its business. Once decided on, the functional currency does not change
unless there is a change in the underlying nature of the transactions and relevant conditions
and events.
State IAS 21 definition of Foreign Currency

All transactions in currencies other than the functional currency are treated as transactions in
foreign currencies.
IAS 33 Earnings per Share - 3 Short Questions – 2 marks
IAS 33 deals with the calculation and presentation of earnings per share (EPS). It applies to
companies ….

Whose ordinary shares or potential ordinary shares (for example, convertibles, options and
warrants) are publicly traded. Non-public entities electing to present EPS must also follow the
Standard. An entity must present basic EPS and diluted EPS with equal prominence in the
statement of comprehensive income.
In consolidated financial statements, EPS measures are based on….

The consolidated profit or loss attributable to ordinary equity holders of the parent company.
EPS Dilution is…

A potential reduction in EPS or a potential increase in loss per share resulting from the
assumption that convertible instruments are converted, options or warrants are exercised, or
ordinary shares are issued upon the satisfaction of specified conditions.
4. IAS 36 Impairment of Assets - 7 Short Questions – 2 marks
The basic principle of impairment is that an asset may not be carried on the statement of financial
position if ....

The basic principle of impairment is that an asset may not be carried on the statement of
financial position above its recoverable amount, which is the higher of the asset's fair value
less costs to sell and its value in use.
The treatment for an impaired asset is to:
A. Write off the asset on the statement of financial position and recognise that amount in the
statement of comprehensive income.
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B. Disclose the loss in notes to the financial statements of the company.
C. Allocate the impairment loss to the asset and recognise that loss in the statement of
comprehensive income.
D. Delay recognition of the loss until a second impairment test is carried out.
Answer IAS 36 – 2 marks

Ans C
An asset is impaired when….

The assets carrying amount is greater than its fair value.
Goodwill and indefinite-lived intangible assets are tested for impairment….

Certain assets such as goodwill and indefinite-lived intangible assets are tested for
impairment annually even if there is no impairment indicator.
5. IAS 36 – 2 marks – original question

All assets subject to the impairment review are tested for impairment where……
5. Answer IAS 36 – 2 marks – original question

All assets subject to the impairment review are tested for impairment where there is an
indication that the asset may be impaired.
A cash-generating unit is ….

The smallest identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets.
Under IAS 36 goodwill and impairment testing must be allocated to….

Goodwill acquired in a business combination is allocated to the acquirer's CGUs that are
expected to benefit from the business combination. However, the largest group of CGUs
permitted for goodwill impairment testing is the lowest level of operating segment. Under IAS
36, Impairment of Assets, impairment testing of goodwill must be performed at a level no
larger than an operating segment as defined in IFRS 8, Operating Segments.
IAS 37 Provisions, Contingent Liabilities and Contingent Assets – 2 Short Questions – 2 marks
A provision is a liability of ….

uncertain timing or amount, meaning that there is some question over either how much will be
paid or when this will be paid.
Onerous contracts are those in which….
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Onerous contracts are those in which the costs of meeting the contract will exceed any
benefits which will flow to the entity from the contract.
IAS 38 Intangible Assets – 8 Short Questions – 2 marks
If an asset has physical substance, then it is tangible, except where it is ….

Sometimes, intangible asset is attached to something physical in order to carry it or store it. In
this case, the asset is still intangible because the value of the related physical asset is very
small when compared to the value of intangible asset.

In creating or purchasing an intangible assets, research and development costs should be:
A. Written off as soon as they are incurred.

B. Recognise both costs as an asset if acquired in a business combination.
C. Recognise subsequent costs as an asset for an asset acquired in a business combination.
D. Recognise research costs as a development cost if they cannot be separated from the
development phase.

B
An intangible asset should be carried at ….
Intangible assets can be classified in two ways….

Cost less accumulated amortisation and impairment losses.
Finite life or Infinite life
Company A hires an agent for $100 to purchase a license from Company B for $1000. This
transaction should be recorded as follows:
A. Record the asset on the balance sheet at a value of $100, recording $1000 as an expense in
the period.
B. Record as an intangible asset at a value of $100 monetary units, capitalize the $1000 and
record as a separate intangible asset.
C. Assess the actual fair value of an intangible asset according to the valuer and record it at this
value and write off the difference between $1100 and this value.
D. Record the asset on the balance sheet at a cost of $1100 as a single intangible asset.

D
If an intangible asset is used as security on a long-term loan, which one of the following is correct:
A. This fact must be disclosed in notes to the financial statements which must also, specify the
residual value of the security.
B. This fact does not need to be disclosed.
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C. The intangible asset should be written off.
D. The intangible asset is not subject to amortisation so long as it continues to be used as a
security.

A
Company A has an intangible asset valued at $10,000, with a useful life of 5 years and undertakes a
commitment that by the end of its useful life to sell it to company B at a price of $2,000.
This fact should be reflected in the account as follows:

A. Increase the initial cost of the asset by $2,000 and record in the financial statements
$120,000.
B. Record in the financial statements $8,000.
C. Record in the financial statements $10,000, amortise over time with $2,000 as the residual
value.
D. Record in the financial statements $10,000 and amortise over 5 years and record $2,000 as
a, non-current liabilities related to asset retirement.

C
A company has in its financial statements an intangible asset – the right to lease a land plot for
agricultural purposes. The company plans to grow wheat on it for 10 years and has rented the plot for
2 years, with an option to renew the lease.
This fact will be recognised as follows:
A. As an intangible asset and amortise for 10 years.

B. As an intangible asset and amortise it for 2 years.
C. No recognition as an intangible asset.
D. As an intangible asset and test for impairment annually.

B
A company has decided than they were incorrect in capitalising costs as an intangible asset and they
have now decided to write off the costs as a change in an accounting estimate.
Explain how this write off should be treated.

The correction should be recognised retrospectively as a correction of an error, in accordance
with IAS 8, not as a change in an accounting estimate.
IAS 40 Investment Property – 1 Short Questions – 2 marks
Under the fair value model, a company should show a reconciliation between …. and also….

The carrying amounts of investment property at the beginning and end of the period, showing
additions, disposals, fair value adjustments, net foreign exchange differences, transfers to and
from inventories and owner-occupied property, and other changes.
18 | P a g e
Significant adjustments to an outside valuation.
19 | P a g e

IFA 3 and 2 Mark Questions QB Only

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DIPLOMA IN IFRS QUESTION BANK

2 and 3 mark questions and answers

IFRS Short Questions – 3 marks

IFRS 2 Share-based Payments - 1 Short Question – 3 marks

State the grant date.

State the date the expense was recognised.

State the vesting period.

3. Answer IFRS 2 – 3 marks

IFRS 3 Business Combinations - 1 Short Question – 3 marks

Calculate the consideration for a controlling interest in ZN.

1. Answer IFRS 3 – 3 marks

NCI share price - $4.25

1. Short question IFRS 5 – 3 marks

Explain the main requirements of IFRS 5.

1. Answer IFRS 5 – 3 marks

2. Answer IFRS 5 – 3 marks

IFRS 9 Financial Instruments – 2 Short questions – 3 marks

Year end Expected cash flows Discounted at 5% DCF

31 May 20X1 $0.10m .9524

31 May 20X2 $0.10m .9070

31 May 20X3 $0.10m + $4.8m .8638

1. Answer IFRS 9 – 3 marks

Year end Expected cash flows Discounted at 5% DCF

31 May 20X1 $0.10m .9524 $.0952

31 May 20X3 $0.10m + $4.8m .8638 $4.233

1. IFRS 10 and 13 – 3 marks

State the fair value of property and debtors.

1. Answer IFRS 10 and 13 – 3 marks

2. IFRS 10 and 13 – 3 marks

2. Answer IFRS 10 and 13 – 3 marks

3. IFRS 10 and 13 – 3 marks

State the appropriate journal entries on the 1 February 20X1.

State the appropriate journal entries on the 31 January 20X2.

4. IFRS 10 and 13 – 3 marks

State the appropriate journal entries on the 1 February 20X1.

State the appropriate journal entries on the 31 January 20X2.

4. Answer IFRS 10 and 13 – 3 marks

IFRS 12 Disclosure of Interests in Other Entities - 3 Short Questions – 3 marks

1. Answer IFRS 12 – 3 marks

2. Answer IFRS 12 – 3 marks

IFRS 15 Revenue from Contracts with Customers - 1 Short Question - 3 marks

1. Answer IFRS 15 – 3 marks

IAS Short Questions – 3 marks

1. Answer IAS 8 – 3 marks

IAS 10 Events After the Reporting Period - 1 Short Questions – 3 marks

Define a non-adjusting event….

1. Answer IAS 10 – 3 marks

IAS 12 Income Taxes - 2 Short Questions – 3 marks

1. Answer IAS 12 – 3 marks

The tax charge is….

2. Answer IAS 12 – 3 marks

IAS 19 Employee Benefits – 1 Short Questions – 3 marks

1. Answer IAS 19 – 3 marks

IAS 36 Impairment of Assets - 2 Short Questions – 3 marks

The following information at 1 November 20X6 is relevant:

Calculate the impairment loss.

1. Answer IAS 36 – 3 marks

The following information at 1 October 20X3 is relevant:

Calculate the impairment loss.

2. Answer IAS 36 – 3 marks

IAS 38 Intangible Assets - 2 Short Questions – 3 marks

A. Yes, it is, as a part of the development of the software

1. Answer IAS 38 – 3 marks